Navigating the future of healthcare financial growth

0:06 Good afternoon and thank you for joining us to for today's webinar navigating the Future of Healthcare strategies for financial resilience and growth. 0:17 We're glad to have you here. 0:19 My name is Ron Michalak and I handle the corporate sponsorships here at the IHA. 0:25 Today's webinar is being presented by Optum, a 2025 IHA Gold Corporate Sponsor. 0:34 We encourage your questions. 0:36 Before we begin, here's how you can participate. 0:40 Use the chat box icon at the bottom of your screen to send in questions at any time. 0:47 If you'd like your question to remain anonymous, you can send it directly to me. 0:53 Here's a few other announcements. 0:55 Please know that IHA respects your privacy. 0:59 Therefore, since we are recording this webinar, please be advised that by attending the webinar, you will be considered to have consented to being recorded. 1:09 If you do not want to be recorded, please exit the webinar now. 1:14 Registered attendees will receive a link to the recording which will also be available on the IHA website for 60 days. 1:24 It is now my pleasure to introduce today's speakers. 1:28 1st, we have Ken Leonczyk, Senior Vice President of Enterprise Clients and Morgan Haines, Practice Leader for margin Transformation. 1:41 So Ken and Morgan, thank you for joining us today. 1:43 The floor is now yours. 1:47 Thanks so much. 1:47 I appreciate it. 1:48 As you heard, I'm Ken Leonczyk. 1:50 I look after enterprise clients on behalf of Optum and, and keep an eye on what's going on big picture in the healthcare world. 1:59 I've been at the Advisory Board company Prior to joining Optum and then an attorney in DC working at healthcare policy and strategy before that. 2:12 So Morgan, why don't you introduce yourself and then and then we can get the ball rolling? 2:18 Absolutely. 2:18 Ken, similar to you came into Optum from the Advisory Board company about 19 years ago. 2:25 In my current role, I lead our margin transformation practice, which is an Optum advisory, the consulting arm of Optum Insight and we help clients with revenue cycle, supply chain and workforce consulting. 2:37 So all three areas that can definitely support organizations in driving margin improvement, something that I know is top of mind for everyone these days. 2:49 Fantastic, thanks. 2:50 Well, we've got a limited time, so let's dive in our our session today is all about navigating the future of healthcare. 2:58 Morgan's going to hit on the strategies for growth and margin improvement. 3:02 I want to start by sitting the stage with the biggest trends that I'm seeing across the industry right now. 3:08 I mean, dominating pretty much every conversation I have is policy regulation law. 3:15 So I want to start with that with the One Big Beautiful Bill Act, which was signed into law on Independence Day, July 4th of this year. 3:25 The law was in response to President Trump and the GOP's promise of extending tax cuts and increasing security funding. 3:32 And to do that they had to do a combination of cutting spending and they had to do some some deficit increases too. 3:38 They, and they also have increased the debt ceiling from 36 trillion to 40 trillion. 3:42 And there's, there's simply no way to do that, to get those tax cuts without cutting healthcare spending. 3:48 Well, why? 3:49 Well, because healthcare represents the bulk of federal discretionary spending. 3:53 So this bill includes over $1 trillion in cuts to the federal healthcare programs to a variety of them over the next decade. 4:02 There are many, many, many pieces to this law across Medicaid, the Affordable Care Act Marketplace, and Medicare. 4:10 But at a very high level, there are a few that I want to make sure that you are familiar with. 4:18 I'll start with the changes that reduce insurance enrollment. 4:24 We're going to see a reduction in affordability for beneficiaries that comes through restrictions on eligibility for premium tax credits in the marketplace and particularly there for for non citizens and and low income enrollees and and also just added cost sharing for certain parts of the Medicaid beneficiary population. 4:43 There's also the increased administrative burden that generally makes it harder to to get enrolled and and stay enrolled. 4:52 This includes the new national work reporting requirements that's for able bodied adults receiving Medicaid. 4:59 There are also increased steps for getting through all of the enrollment processes and an increased frequency of enrollment review. 5:08 So these changes in the law, they're expected to increase the number of uninsured people by about 10 million people. 5:16 The expiration of the emergency enhanced ACA marketplace subsidies that's going to come the end of 2025, that's also expected to add another 4.2 million uninsured. 5:27 So all together we're looking at 14.2 million more uninsured people, which is likely to have a real revenue impact for providers, particularly hospitals and and health systems. 5:41 All right. 5:42 I want to now talk about the ACA subsidies. 5:45 We're moving away from from Medicaid. 5:47 The ACA marketplace growth has really skyrocketed coming from the enhanced and expanded federal subsidies that were in the American Rescue Plan 2001. 6:00 These were extended in the Inflation Reduction Act and and they're set to expire at the end of the year. 6:07 So definitely need you to watch that place, watch that space, because we'll see what happens with that then. 6:13 Then there are the changes that just directly reduce reimbursement. 6:18 There are new rules around how states can raise money for their Medicaid programs in order to get federal matching dollars. 6:24 What I'm talking about here are, and you all know have heard this, provider taxes and state directed payments. 6:30 So you probably know this, but I just want to remind you provider taxes allow states to draw additional federal funding by implementing an internal tax on healthcare providers. 6:41 What this does is it triggers a federal match, which is then redistributed to the tax providers, which often results in increased overall funding for the state's healthcare system. 6:53 State director payments, state directed payments allow states to direct Medicaid reimbursement rates and increase those Medicaid reimbursement rates to, to providers as a way to improve network access. 7:06 So these new rules on provider taxes and, and directed payments, they're a budget issue for states. 7:12 States need to balance their budgets. 7:14 They also need to ensure that enough participants are in are in Medicaid and because they've been paid, you know, and so it's a real, it's a real challenge because the law increases the deficit substantially. 7:27 Sequestration is triggered unless Congress acts. 7:30 You need 60 votes for that to remind you. 7:33 Sequestration is the automatic across the board spending cut that comes to federal expenditures. 7:40 It was originally designed as a fiscal policy tool to, to, to just basically make sure that federal budgetary discipline occurs and, and basically to reduce the, the federal deficit. 7:53 Now it's, it's triggered when the cost of running the government exceeds the budget cap set by Congress. 8:03 That's one of the things we're facing right now. 8:05 So if Congress doesn't act, we're looking at 4% cuts to Medicare for the next decade. 8:10 And that's in addition to to the 2% in cuts we're already facing. 8:15 So these changes in the law, the sequestration that's triggered by the changes represents basically around, you can see the bottom part of the the, the slide there, $910 billion in direct cuts across the board of federal funding, 535 come from sequestration, another 375 from Medicaid tax and payment rules. 8:36 That's not including the federal funding reductions that come from overall all enrollment losses. 8:43 All right, I've thrown a lot at you very quickly. 8:46 On our next slide, I want to talk about the timing of the impact, moving away from the size of the impact. 8:54 Several major changes to enrollment eligibility and affordability are going to take place in the next few years. 9:00 So the marketplace, that's where we're going to see the most immediate change. 9:06 After that Medicaid work requirements and verification changes are going to hit by the end of 2026. 9:14 By the way, just to get the this bill over the finish line and in the negotiations, they move those work requirements from 2029 to 2026, bringing them in a lot faster than the biggest Medicaid payment cuts to states. 9:27 They're going to phase in more gradually starting in several years. 9:30 So a few items to note, the removal of enhanced ACA subsidies and Medicare sequestration, they could still both be changed by Congress. 9:39 That's why I said I think I misspoke and said watch this place, watch this space. 9:43 Then there's a $50 billion rural health fund that's meant to help keep rural hospitals and business that's going to be partially distributed each year. 9:53 Right now, I've heard of a number of urban systems that are trying to get in on this, so we want to watch that space as well. 10:01 And there were additional marketplace changes that were in the House version of the rule. 10:08 They were not in the final bill, but they were finalized by or or made into a rule by CMS. 10:15 So on the next slide, we're going to see so much that was in this bill that that from the reconciled bill, you know that there are a few words. 10:29 The Advisory Board looks at this carefully. 10:31 Check out our website there, McDermott Kaiser Family Foundation. 10:34 There are also places that go into a lot of detail. 10:37 I touched the biggest parts of this bill. 10:40 What I do want to talk about finally and haven't talked about yet quickly before moving on, is that Medicare does get some increased spending. 10:51 It originally with a partial doc fix. 10:53 This turned it into an updated factor for just this year. 10:57 But again, we could be looking at major cuts or sequestration if we're not exempted from the pay go rules. 11:04 Congress has also further limited which drugs are subject to Medicare price negotiation. 11:11 Now that effectively increases spending on drugs that are that are not covered. 11:15 There are also some significant things not in this law. 11:18 What what you see on this slide, by the way, is look which big healthcare cuts change the most from the healthcare from the House to the the Senate. 11:26 So there are some things that didn't make the law at all, like F map reductions to States and Medicare site neutral payments and restructuring GME, gradual graduate medical education, incompetent care, bad debt payments. 11:43 I'm not saying actually that those aren't going to be addressed by this administration. 11:49 This administration might deal with those areas, you know, through CMS and through through the the rule making process. 11:56 So definitely we want to keep our eyes on that as well. 12:00 All right, let's move on in and then and then our next slide will look about the the the policy issues and tariffs which have healthcare leaders very concerned. 12:13 Now you all know this, U.S. 12:16 hospitals are heavily reliant on overseas goods. 12:19 We import $94 billion that we did import. 12:23 This is I think from 2020, 94 billion you can see on the screen in pharmaceuticals, 68 billion in medical device, that number is only climbing. 12:34 Healthcare organizations are going to be affected by tariffs directly through these finished medical products, but are also going to be affected indirectly through the increasing material costs for all the inputs that are going into our equipment, all the inputs that are going into our our buildings. 12:50 The tariff rates proposed by the Trump administration are in flux. 12:56 They are still under negotiation. 12:59 You can see the differences in proposed tariff rates across that list of countries there on your slide. 13:05 These are all significant suppliers of healthcare goods. 13:08 To be clear, some of these are already, you know, well out of date, but it's good to just instructed to to just take a quick look at your China, Canada, Mexico, they're all major inputs for medical equipments and the device supply chain for US, Ireland, EU country. 13:26 They're the largest farm provider of finished pharmaceutical products for the US marketplace. 13:31 They're a big tech importer as well, just so you know. 13:34 So while pharmaceuticals have historically been exempt from tariffs and they weren't covered by the administration's tariff announcements that we've all heard, the administration has said that they are looking at tariffs on imported medications and they've indicated that they want to roll out pharma specific tariffs over the next 12 to 18 months. 13:59 They want to shift to domestic manufacturing and they're saying the rates could be as high as 200%. 14:06 Pharma companies have told me and, and, and my colleagues it's going to take us a lot longer. 14:11 Even if we started now to get our domestic manufacturing up to speed, it's going to be 12 to, to 18. 14:18 So that's an important area for us When it comes to the pharma tariffs. 14:24 I, I will tell you there is an enormous amount of, of, of uncertainty out there. 14:29 And the first thing if the tariffs did happen, I'd be concerned about is availability of generics. 14:35 The second I would think is just overall access for our patients. 14:37 The third, no small thing, but just you know, still third is cost. 14:42 These all impact our mission. 14:44 I'm taking care of our parents so patients. 14:46 So we definitely want to keep an eye on this. 14:49 There's other, just one other thing I want to note here. 14:51 Because of the IRA, Medicare requires manufacturers to pay inflationary rebates. 15:00 This means they have to pay rebates on any price increases that are above the CPI. 15:06 That's the consumer price index. 15:08 This actually could put a limit on tariff induced price increases for Medicare. 15:15 So a little wrinkle in there over like what will the overall cost be to to keep your eyes on? 15:22 All right. 15:22 Our next issue that I want to look at and it's on our next slide, it's what is happening at CMMI. 15:35 Think the direction they are heading on is becoming much more clear. 15:41 CMMI is all about accelerating value based care impact, but the shift is, is this major driving principle is now all about protecting the federal taxpayer. 15:55 Every move CMMI makes is being evaluated through the lens of fiscal return. 16:01 That principle, and it was a core principle from the very beginning of CMMI. 16:05 But it's it's a return, it's being brought back big time and it is reshaping the way that CMMI sees its role around innovation. 16:13 Haven't really been, you know, the new models, we're not seeing them launched yet, but what we are seeing is a distinct pattern that shows three major shifts over underway. 16:24 You can see them on your slide there. 16:26 First is from experimentation to fiscal discipline. 16:30 Over the past decade, CMMI tested more than 60 models, but you know, the results aren't that great, only a few delivered meaningful cost savings or any kind of meaningful quality improvement. 16:41 So the message I think is very clear. 16:43 Now that this era of broad experimentation is over, we are going to prioritize models with clear, timely ROI. 16:52 They've also terminated 4 major models early, and they reduced payouts in the ACO Reach and Kidney Care choices. 16:59 So I want you to expect fewer pilots, shorter timelines and a push for standardized scalable models with immediate fiscal discipline. 17:09 The second, again moving on the slide from left, left to right, is from optional mandatory risk. 17:17 Historically, CMI, CMMI encourage providers to gradually take on risk, if at all. 17:24 And the updates been slow. 17:26 Providers have been like, we don't really need that risk. 17:27 Well, the patience of CMMI is kind of over this leadership has a hard line, harder than what we saw in the first Trump administration. 17:35 Preserving the team model while cutting others that I think shows a reflecting openness or even a preference for mandatory participation. 17:44 The proposed ASM, that's the ambulatory specialty model proves this. 17:48 It's a mandatory model to hold specific sub specialties accountable for improving product condition management. 17:55 The director, A Sutton, he suggested that all future models could require a downside risk. 18:01 I wouldn't be surprised to see that, you know, we're going to see a growing share of Medicare and Medicaid beneficiaries and global risk adjustments. 18:09 I'm pretty convinced of that because the goal is specific. 18:12 It is shifting the risk from taxpayers on the providers, not not on the intermediaries. 18:18 Even so third one up there, right on the right hand side of the screen from HealthEquity to efficiency and market competition, previous administration emphasized social determinants, huge emphasis on equity. 18:32 CMMI now is taking a much more market oriented approach. 18:36 They say that they still approach HealthEquity but, and this is a direct quote quote, but not at the expense of efficiency and outcomes, End Quote. 18:44 So we've seen the removal of mandatory social determinant health screenings from the ahead model. 18:49 We've seen deprioritization of equity funding. 18:52 Instead, what we've seen is a real emphasis on consumer choice, on competition, on support for independent providers. 19:02 CMMI is looking at MA redesign, they're looking at expanded scopes of practice, they're looking at virtual models, at home models, you name it. 19:13 All about improving efficiency. 19:15 So my final take away here is that CMMI is no longer just an innovation lab. 19:24 It is becoming a fiscal performance engine. 19:29 I think the future of value based care is going to be leaner. 19:31 I think it's going to be faster. 19:32 I think it's going to be more financially accountable. 19:34 So for providers, particularly hospitals and health systems, this means adapting to a world where risk is required, where equity is market driven and where every model has to prove it's worth and it's got to prove it's worth quickly. 19:46 So what do you do? 19:47 Well, you got to self assess. 19:48 And really I think the gaining question for all of you and for all providers out there is, are we operationally and financially ready to take on or at least support partners in taking on downside risk, especially in mandatory models? 20:04 All right. 20:05 So summing up my section on our next slide here. 20:09 That was the policy, that was the law, that was the regulation. 20:12 But remember, these changes really are only are just part of the story. 20:17 We're also seeing the continuation of the top trends that we've been feeling for the past two, 2 1/2 years or so. 20:24 We're seeing a collapse of the safety net in the healthcare system. 20:29 Heard about it a lot in some of the earlier comments I just made. 20:32 We're seeing that our legacy hospital business is eroding faster than ever. 20:37 This is a financial situation that's just going to be hard to climb our way out of AI. 20:44 It continues to feed our shiny object syndrome. 20:48 There's a lot of promise, but it's still early on. 20:50 Established companies that have been in the healthcare game for a while I think have some really great AI technologies and opportunities out there. 21:01 Everybody seems to have an AI solution. 21:04 Be careful. 21:05 You know, I, I would stick with the with the established entities there unless you're really, really sure payers, they're, they're struggling. 21:14 They're they're they're trying to manage utilization, they're trying to manage costs. 21:17 You know, narrower networks I think will probably be the answer, but that is it at odds with just the general push that consumers and purchasers have been giving around. 21:28 We want to have a lot of choices, but this is math, you know, like we're entering into a world where we can't really do everything anymore. 21:38 And then finally, I think affordability is that, you know, this is the keyword, but affordable to who? 21:43 How do we measure that and how do we measure value? 21:46 So I'm going to end my section before giving to my my friend and colleague Morgan, who's going to, you know, go into details of what do we do about this by saying, look, I think you need to start by assessing the impact of all of these on your on your organization's because the impact of these policies, these regulatory changes, these legal changes by themselves, it's going to be significant. 22:11 The impact of doing nothing right now, I think is absolutely catastrophic. 22:15 You got to do something and you got to start planning. 22:18 The good news though, is that in all of this, there are incredible opportunities to change, to grow, to improve margins, to improve overall care delivery for our patients, to focus in on our mission on, on what is important and ensure that our margins are robust enough to allow us to focus in on the mission. 22:38 And, and that's what that's what Morgan is going to dive into here and give you some, some real concrete strategies to do that. 22:47 So I'll hand it over to her having set the stage. 22:50 It's not great news, I get it, but it's real. 22:53 And, and, and, and we've got to respond. 22:55 And I think we're up for the challenge and I think there's some real opportunities for us to make some big impact. 23:01 So Morgan, I'm going to I'm going to hand it over to you. 23:03 All right, thank you, Ken. 23:07 All right, so on the next slide, we will begin with as Ken said, those six no regret strategies go back one sorry, essentially what are actions that provider should take immediately in light of what you just heard? 23:23 I think you said it best, Ken. 23:25 We need to act now. 23:26 And so inaction is no longer financially viable. 23:30 The strategies that we'll talk through today are designed to deliver value today while also positioning your organization to better navigate some of the future challenges that are going to be coming the next couple of years that you just saw in that timeline. 23:43 It is far more effective to make proactive decisions now than to be forced into reactive ones under pressure and duress. 23:52 So these next 6 areas here are going to guide the discussion for the day. 23:57 I'm the first three really focused in on the revenue cycle space. 24:01 So how can you modernize current operations? 24:05 How can you leverage the patient financial experience as an attractor for growth? 24:11 Whereas Ken said, are you thinking about AI automation and infusing that into operations, supply chain, the tariffs, spend management, how can we do a better job there? 24:24 Workforce is still a challenge that we that needs to be mitigated in order to be successful. 24:29 And then finally, when we think about reducing care variation, but also thinking through throughput and access again to increase growth to the organization. 24:40 So we're going to start with the first strategy here on the next slide. 24:47 As margin pressures intensify, it's really time to rethink how we approach the revenue cycle, not just in terms of speed, but performance and impact. 24:56 And so on this slide, it outlines a shift and how we are recommending organizations measure success and how really we should think about the day-to-day work. 25:05 Traditionally, it's been about speed tracking some of these legacy metrics you see here. 25:10 AR Day is aging DNFB point of service collections. 25:13 They're still super important, but they only tell part of the story. 25:17 As you move to the right in performance, it takes us a step further. 25:20 So how do we maximize net revenue and patient satisfaction through technology targeted programs? 25:27 We're looking at cash collections and expected reimbursement, but as we really want to find the real opportunity, it lies an impact on the far right. 25:35 So balancing revenue performance with operational cost to maximize yield. 25:40 It's not just about how much we collect as an organization, but how efficiently we do it, factoring in in expenses and strategic investments. 25:49 The shift also requires A mindset change. 25:52 So instead of asking did we get the job done, we should be asking are we performing as well as we should and more importantly our services delivering value to the organization. 26:02 Leading organizations really focus on the impact or what we call yield with our clients. 26:07 So how much of what we should be collecting are we collecting and at what cost structure? 26:13 So again our services of good value and are we making the right investments in people, process and technology. 26:19 What we find is when organizations look at cost to collect in a vacuum, it's not going to really indicate if you're collecting the dollars you should. 26:27 On the flip side, if you look at collections effectiveness, are you over investing to achieve the performance you're getting impact or yield focus in the revenue cycle is really the marriage of revenue amplification and right sized investments. 26:41 And on the next slide, we'll talk about both of those guiding principles. 26:48 On the revenue side, it's simple, capture every dollar that is earned, tightening processes across the continuum so that no revenue is left on the table. 26:57 On the investment side, how do you pursue value for every dollar spent, making sure you are aligning resources effectively with outcomes. 27:06 This has been, I would say a challenge from when I got into the revenue cycle space about 20 years ago. 27:13 We are still blocking and tackling. 27:15 However, we have to get it right and then we need to move into innovation, which we'll talk a little bit about. 27:20 When we think about the this piece here, we really break it down into four key domains, patient access and experience. 27:27 So strengthening the health system's ability to deliver care while expanding self-service capabilities. 27:33 It improves efficiency, but also the patient journey, clinical revenue cycle or your mid revenue cycle really focused on documentation and coding accuracy that can be accelerated through automation and technology. 27:46 A lot of efforts here can reduce errors and accelerate reimbursement revenue integrity, safeguarding revenue capture and pricing is competitive and accurate and then transforming your workforce footprint in this space. 28:01 And then finally, the business office. 28:02 So really maximizing reimbursement strategies and what does our vendor landscape look like? 28:10 So when we think about achieving modernization, revenue cycle leaders really need to break down silos. 28:16 The challenge that consistently emerges across all of these domains that I hear about from my clients every day is denials. 28:23 It is arguably the number one pain point for every single client we support today. 28:28 And if it was easy to solve, it wouldn't be such a persistent topic. 28:31 But the reality is that it's complex. 28:34 It's embedded across the camp continuum. 28:36 It requires collaboration and coordination, not just in revenue cycle, but connected departments. 28:42 And so when we think about how organizations we work with are effectively addressing denials, it's really thinking about it holistically as an end to end strategy. 28:51 So a few areas that we view as critical here, 1, front end accuracy, it all starts when the patient registers or arrives at the hospital or location. 29:01 So do we have the right patient and procedure details at the time of scheduling to make sure we're preventing any sort of out of network issues? 29:09 We've got the information necessary to enable authorizations ahead of the patient coming in, moving through the continuum provider education. 29:19 Are your clinicians equipped with knowledge and tools to document care accurately and compliantly, making sure again that we're getting payment and reimbursed appropriately? 29:30 Your charge description master, simple, but is it up to date, comprehensive, including all billable codes, especially as you have new procedures or supplies coming in? 29:41 And then from how do you use data? 29:43 So how are we using analytics across the continuum to track denials, trends, root causes, shift to really what are the predictive patterns that we can understand. 29:55 And then another area is really how do you connect that to your managed care teams? 29:59 How do we make sure that we are establishing feedback loops between those two departments to really optimize contract performance? 30:07 I think that tends to be a gap that we see when organizations are approaching denials is it's a revenue cycle problem, it is a whole health system problem and we need to approach solutions in that same way. 30:21 When we think about different metrics on the bottom right here or the bottom of the page, we're really starting to track the general metrics that you see, but also some of these more emerging metrics. 30:32 So your touchless revenue cycle management rate, financial Net Promoter score, obviously still cost to collect and yield. 30:39 But at the end of the day, we know revenue cycle modernization is not just about efficiency. 30:44 It is truly about creating a smarter, more resilient revenue cycle that supports financial health. 30:50 Again, no money, no mission but also patient satisfaction. 30:54 And the next slide is going to highlight a critical opportunity for organizations and that is reimagining the patient experience not just as service improvement, but how can this become a strategic attractor for your organization. 31:13 This is an opportunity that revenue cycle can better support organizational growth initiatives. 31:19 So you can see on this page, there's some metrics on the bottom that really mirror what we're seeing in how patients are choosing care, especially in a competitive marketplace. 31:31 And So what can you do from a revenue cycle standpoint? 31:35 First, mirror the excellence of the clinical experience when you think about the financial journey. 31:40 Senior leaders across top health systems that we've spoken to all agree patients expect their financial interactions to match the quality of their clinical care and patient feedback confirms this financial experience plays a major role in where and when they choose to receive care. 31:56 When you think about more patients becoming uninsured, losing benefits, how are they going to decide where to receive care? 32:04 Second, how can we optimize the experience to drive loyalty? 32:08 Research shows that a smoother financial journey not only improves satisfaction, but also boosts payment likelihood and long term retention. 32:17 Your revenue cycle staff are the front door to the health system and the final place that they interact when they are receiving and or paying a bill. 32:27 And so really an opportunity here to maximize lifetime value of patients by making those interactions intuitive and supportive and then finally really seizing that first mover advantage. 32:39 So when we have hosted national roundtable tables and then re asked some of our organizations, what are they focused on, it's really there's a gap in consumer focused innovation. 32:49 I think a lot of places are starting to invest here, but really by leading the way as we talked about it, we'll talk about in a few minutes with automation, there's a full opportunity here again to be front and Center for organizations. 33:03 So it's not just convenience, it's really compete. 33:07 It's really creating that competitive edge to have that modern patient centered experience. 33:12 And one of the ways to do that is when we think about how can AI and automation be leveraged. 33:19 So if we flip to the next slide, Ken said it, there is a lot out there when we think about the technology landscape between the number of startups that emerge every month, frankly that talk about AI, automation, RPA, it's it, it's exorbitant and understanding what to do is important. 33:45 It's not just about access to tools, but it's really how do you strategically integrate innovation into your organization to remain competitive with workforce constraints and the other industry pressures. 33:58 But it's doing it the right way. 34:02 I have seen many organizations just jump at shiny objects and have not been able to see the returns that they hope to get. 34:09 And so we really want organizations and guide organizations and thinking through this strategically about what's going to have the most impact for your organization. 34:19 And so this slide is meant to depict the patient journey. 34:23 By no means is it every single step, but it's through with a revenue cycle lens to really highlight where we see automation and technology that can be leveraged. 34:34 Obviously you always need to have the manual intervention at the ready. 34:38 You're never going to completely reduce the reliance on FTEs, but how can you shift your workflow to work by exception and or shift your employees to work on complex scenarios? 34:52 It helps your workforce to work smarter, not harder. 34:56 There's also number of elements within here on self-service where patients can and should be engaged to support the journey themselves, the tie end of the patient financial experience. 35:08 But again, when you see the number of steps here, that means there's many opportunities, but it also means that there's many potential failure points. 35:16 And so we always encourage organizations as the first step, where can you better leverage your EHR? 35:23 Where do they have tools and elements that you can leverage in order to accelerate performance, improve performance, improve quality? 35:34 But let me share a couple of other examples just to paint the picture of how we're seeing organizations do this. 35:40 So let me start with self-service from the scheduling standpoint, because I think getting patients into your health system quickly is going to be one of those levers to drive growth and the revenue cycle sits at front and center here. 35:53 So when you think about online scheduling, there are many extremes when we think about maturity just in this one function. 36:01 So we have providers who have quote UN quote online scheduling, but really what it is, is a request that goes to an agent that they still need to check the schedule, call the patient back to confirm they missed them because nobody picks up a phone number they don't know these days. 36:17 So it's a arduous frustrating process for the consumer, very low from a maturity standpoint and really not touchless. 36:25 2. 36:25 When we think about really high maturity and high automated self scheduling, it is true innovation. 36:33 So patient can go online, choose their location, provider, date, time, confirm their appointment, complete all pre registration processes, ideally pay their Co payer out of pocket amount in advance. 36:46 After just a few minutes on their phone, their tablet, their computer. 36:50 It means that your provider organization has defined templates with their physicians decision trees. 36:56 Everything is set up. 36:57 It requires real clinical collaboration, but it's really becoming one of those requirements that patients expect to see from their healthcare system. 37:08 Another great example as we go through the journey is in the clinical revenue cycle space. 37:14 A lot of investment being made in autonomous coding, ambient AI scribing. 37:20 There is huge benefit to be had again to leverage AI or automation in this space, not only for more accurate documentation, but how can we reduce physician burden again, It has to be maintained and implemented with change management. 37:37 How, if we're going to implement autonomous coding, for instance, how are we shifting existing resources, not just adding cost to the organization? 37:44 If we're leveraging an ambient AI scribing technology, do our physicians understand what needs to be documented in order to support that? 37:54 Just because you have a technology that's picking up what they say, are we making sure that it's clinically compliant? 37:59 And so again, a lot of spaces where we can infuse automation and AI, but if we don't do it right, it can backfire for organizations. 38:08 And so for the audience, what I would say is take a look at the side, think about where you might be on the maturity model kind of from a 1 to 10. 1 being very manual 10 being you leverage automation or technology across every single one of these functions for every service, every location at your organization. 38:28 There's not a lot of places that are at the 10 and really seeing returns. 38:32 But I think that is where we are going solely but surely as an industry. 38:38 So with that, with automation, let's jump into supply chain on the next slide. 38:47 Ken has already painted the picture of how challenging this space might be with the tariffs. 38:53 I mean, they're shifting day by day, hour by hour. 38:56 We, the team that monitors this, because it is so challenging for our clients to keep up with inflation continues to drive up costs and the pressures aren't going away. 39:05 It's just going to get harder. 39:07 And so I know you all as providers feel the squeeze immediately and you know what's coming over the long haul. 39:14 Yeah, despite these headwinds, similar to the revenue cycle, we're still facing the same foundational issues and challenges that have been been around for years. 39:22 So the question becomes how do we approach supply chain differently? 39:27 How do we think more progressively like some of the best performing systems do? 39:32 And so those organizations aren't just reacting, they're really building resilient data-driven supply chains, accurate real time data to benchmark spend against like organizations. 39:44 They have integrated their ERP and EHR systems. 39:47 They've enabled that end to end automation from procure to pay all the way to contract to cash. 39:54 They leverage analytics and AI not just to look backwards, but also forward, really identifying patterns, predicting disruptions, recommending alternatives before problems arise again, proactive versus reactive approach. 40:09 And most importantly, their clinicians are aligned. 40:13 They understand the value of supply chain and adopt products through value analysis without resistance. 40:19 That's the future. 40:21 Mirrors what we're seeing again from a revenue cycle modernization standpoint, leveraging AI powered exception management workflows. 40:29 It's where we're headed. 40:30 But getting there is not going to be that easy. 40:35 Many times what we see is that supply chain is treated just as a cost center, but truly it can be a strategic lever for organizations if invested in, right. 40:44 So let's shift our conversation a little bit to what's working. 40:48 Let me share a couple of examples of how providers are driving success here on the next slide. 40:59 So as you saw on the last side, supply chain accounts for about 20% of total operating budget, yet it's not necessarily as scrutinized with the same rigor as other areas. 41:10 So while supply chain might not directly touch patient care, the dollar saved are absolutely real and immediate. 41:19 And when done right, savings can be reinvested into clinical priority staffing innovation. 41:25 Again, no margin, no mission. 41:27 How do you leverage benefit here to reinvest where you need to? 41:32 So let me walk you through a couple of examples. 41:35 On the right hand side, you can see really where we see some of those core spend categories and let me share a little bit of where we recommend an organization making sure they get it right. 41:46 One provider preference items. 41:49 I think when I started at the Advisory Board years ago, this was an area of opportunity for providers. 41:56 It remains an area of opportunity for providers. 41:58 However, there is now far more advanced technology and tools to support you. 42:03 But supporting those tools and technology value analysis committees, that's your first move. 42:09 If you don't have it, how do you engage your own clinicians and physicians in product decisions that is essential for buy in and for outcomes. 42:19 We worked with an organization three hospital system really focused on three areas, Med surg, surgical services and cardiovascular. 42:27 It was where they saw the greatest variation in spend within their organization. 42:32 If this was the first time that they really brought physicians to the table to really think about a more structured enterprise wide approach to evaluating any sort of supplies and within the first year they achieved over $500,000 in bottom line savings. 42:48 So the money is there. 42:50 The real power of that came from data. 42:53 So again, how are you leveraging data to really help you prioritize and create a framework of what you need to focus on in this instance? 43:02 They're top categories that encourage you to look into it for your organization. 43:06 CRM, total joints, spine, bone cement, real opportunities that had it necessary that weren't, I would say easy to capture, but again, by leveraging clinician support, we're able to do so. 43:22 Another area that I would mention is kind of vendor management. 43:25 Again, this is critical in supply chain, but also more broadly across the organization. 43:30 Within that, reviewing contracts is not, should not just be seen as a legal exercise, but more strategically. 43:36 So identifying Evergreen clauses, auto renewals, fragmented vendor relationships, poor performance tracking really is draining organizations billions of dollars. 43:47 So how can you take a look at some of those areas and really see where there might be benefit from renegotiating some of your contracts? 43:56 We found savings in BioMed reference labs, contract labor, food and environmental services is a good one. 44:03 We have worked with an organization that again did a review, identified an opportunity to really consolidate an outsource food and nutrition and EVS under a single contract for their 30 plus sites. 44:16 Big savings around 4 million annually, but it wasn't easy. 44:19 Outsourcing requires a cultural shift, but again in the financial climate everything really should be on the table. 44:27 Leaders need to be transparent, proactive and aligned. 44:32 So let me jump into our fifth strategic imperative workforce. 44:41 So the simple truth, the cost structure for providers has fundamentally changed. 44:47 I think again, inflation, labor shortages, supply chain volatility costs are driving up. 44:53 Labor alone accounts for more than 60% of provider expenses and that continues to get more expensive. 45:00 We've absolutely seen some improvements when you think about nurse turnover, vacancy rates that were up at the height of the pandemic. 45:07 But if you look at that graph there on the left, pre COVID benchmarks weren't exactly that strong. 45:13 A 15.9% turnover rate, 8% vacancy rate still leaves significant amount of opportunity. 45:20 And so there's a lot of factors that are exacerbating this. 45:26 But want to give some guidance. 45:27 Just what can you do? 45:30 We've worked with organizations across the country in a number of different ways and it's really around in your cost savings while also setting the foundation for long term workforce strategies. 45:41 And so couple of recommendations. 45:43 One, always know your gaps. 45:45 Start with benchmarking. 45:47 Why are you overstaffed or misaligned and staffing. 45:50 Without that visibility, it's really impossible to size the opportunity or make informed decisions. 45:56 Everything should be data-driven. 45:58 Second, how can you leverage technology to support your frontline staff? 46:03 So we partnered with a mid sized health system to implementing a staffing tool that really recalibrates assignments every four hours based on census. 46:13 It was a cultural shift, but it uncovers inefficiencies that weren't the fault of clinical teams that they were being blamed for addressing. 46:21 That really improved throughput, which we'll talk about in a few minutes and balances workload. 46:26 And then finally, how can you optimize workflow through automation? 46:29 One example I would give is when you think about pre admission and then that whole bed assignment process worked with an organization that was able to really automate that instead of seeing those surgical delays, day of cancellations and the like. 46:46 So the work isn't easy. 46:48 I think there's many lessons learned when you think about workforce. 46:52 One size doesn't fit all. 46:55 You want to leverage benchmarks, like I said, but I think really it's about respecting your people. 47:00 At the end of the day, labor is your biggest cost, over 60% as we said, but it's also the heart of your culture, so critical to make sure that you are engaging your leaders and your staff when you make change here. 47:15 Now as we move on to the next slide, we also tie workforce when we think about throughput opportunity. 47:22 Again, you have to be staffed adequately in order to make sure you can get patients into the health system and then out of the health system effectively. 47:31 And so there's a number of strategies here. 47:33 I'm not going to dive into all of them, but let me share a couple of examples. 47:38 So I'll talk a little bit about the capacity management and patient flow. 47:41 So best practice it really is to establish a command center model for system wide patient placement including appropriate patient cohorting and transfer center workflows. 47:53 We've had we've partnered with organizations to really do this. 47:56 How do you bring in interdisciplinary huddles? 47:59 Have that command centers really serve as a centralized hub for real time data on bed availability, discharge readiness, and patient movement. 48:09 Daily huddles. 48:10 There is a lot here. 48:11 We had an organization that implemented a number of these tactics and saw 53% reduction in ED hold times and 6000 excess days. 48:20 Again, you are missing out on revenue but also not able to get new patients in the door to your health system. 48:28 Another area here I would call out would be the tie in between inpatient case management, care management and revenue cycle. 48:36 Another opportunity to breakdown silos when you think about more advanced case management processes, so clinical denials, this is an area again that touches all parts of the organization. 48:49 But if you think about and implement proactive discharge planning, referral management and more tighter authorization processes, the collaboration between the two departments can really see a reduction in what we see denials due to patient statusing, medical necessity, insufficient clinical documentation. 49:07 So again, how do you build communication feedback loops between utilization management, case management, CDI, coding quality, or physician leadership? 49:17 There's a lot of areas here that need to work together in order to be truly successful. 49:23 And then finally, let's jump in on the next slide around reducing clinical care variation. 49:30 And so this is one of those areas that, again, you need to start now to see the value down the line. 49:36 This is not going to be something that gets fixed overnight is a huge cultural shift. 49:42 But let me share a little bit about Optum's model and how we drive scalable, sustainable clinical improvement. 49:48 One, it's all about building the foundation. 49:51 Innovation and care delivery and operational excellence become core competencies. 49:56 You need governance structures, incentive alignment, operational rigor that are all essential to support that foundation. 50:04 The ultimate goal is, is that transformed and state when you've got clinical optimization and it's continuous, we always view these efforts as clinician led and technology enabled. 50:15 It focuses on reducing that on where unwarranted variation, but it's a cycle. 50:21 Everything needs to be prioritized, design, embedded and measured and then you repeat it. 50:26 And at the end of the day, what is front and center is the reliability. 50:30 It's not just protocols, but it's how do you really shift values and behaviors in order to make this sustainable. 50:38 There's a number of outcomes on the right that you get from this. 50:42 Again, lower cost structure as you think about eliminating inefficiency, sustain results, clinical alignment. 50:50 There's a lot of benefit here for patient care, but also to your bottom line. 50:56 I'll give you one example of an organization that implemented a new HR system, had significantly increased patient volumes, but they really could not optimize their perioperative services, throughput and emergency care. 51:10 So huge opportunity, we're talking multiple millions of dollars. 51:14 And so really they brought together both those throughput and access best practices with the clinical care along with realizing from a workforce management standpoint, they were actually understaffed. 51:27 And so they were able to see significant improvements over 10 million across the course of a few years. 51:35 Really by thinking again about the right investment at the right time, it's not just a race to the bottom when we think about improvement here. 51:45 And I will close out before we get to Q&A is I always get the question of how do you balance some of this short term cost cutting and activity with long term financial sustainability and viability. 51:58 And so I just said it, but it is not a race to the bottom. 52:02 It's truly thinking about yield and what is the benefit that this investment is providing the organization. 52:09 It's also not having one strategy. 52:11 I think we have to have multiple strategies and work streams underway in order to focus on both quick wins and long term successes. 52:20 And then I think everything starts with where is your opportunity. 52:26 I think you said it Ken in your opening section, but there's going to be different impacts to different organizations. 52:32 And understanding where the legislation is going to impact you, when is it going to impact you is going to be critical to figuring out where do you invest and when. 52:51 Are there any questions? 52:54 If so, please use the chat box function. 53:22 Ken, I've got a question for you if we want to and it when you in all the organizations you work with and speak with across the country, is there kind of one recommendation you have like what's your no regrets right next step? 53:37 I think my, my no regrets next step is to, to do an honest assessment of where you are understanding your your payer mix. 53:50 And I like be willing. 53:52 I think that I think it's to be willing to look in the mirror and, and, and understand where you truly sit. 54:02 I also think it's to be willing to, and this is going to, we're getting a little bit into the, you know, less concrete here. 54:11 But I think it's also to be at least suspend disbelief and be willing to admit that the way that you have done things so far may no longer work for the future. 54:24 That, that, that the, the pressures we're facing externally or such the requirements of what our patients are like. 54:31 You know, the with just as you talked about, like the, the, the table stakes now expectation of patients when it comes to the financial side of, of their healthcare experience. 54:44 Be willing to realize that the way that we've done things before really may not be good enough. 54:48 And be willing to listen to and consider what could I do differently to, to absolutely up the game. 54:55 Finally, I'm giving you 3 no regrets. 54:59 Like put, put your business hat aside, put your clinician hat aside, but put all of your hats aside and, and put on your patient shoes and say, you know, if I am a patient in my community, what is my experience with my health system like? 55:15 And, and what would I want to make it better? 55:18 But those are the three, I would say, oh, I mean, you took some good ones. 55:24 I will leave it with a quote from a webinar that I led about a month ago, two months ago on margin. 55:32 One of the attendees actually made the comment that Noah didn't start building the ark when it started to rain, right? 55:42 You need to start now to be ready for what's coming. 55:46 And I think I said it, but I think I've worked with organizations that have not made change. 55:52 They've been hesitant, they've been reticent to do it. 55:55 And then they are forced to make decisions that might not be best for the organization or the community or their patients, but they have no other option. 56:04 And so I think if I could say anything or give any advice, it would be there's plenty of activities and strategies to take now that will help you avoid that situation down the road. 56:15 Oh, wow, do I, I couldn't agree more. 56:17 I mean, it, it really is. 56:20 It's just simple math. 56:21 Like we're not going to be able to do what we've always done. 56:24 It's simple math. 56:25 We're running like things are getting more expensive and there's less money for healthcare. 56:30 You better start planning now and you better start seriously considering what you want the future to look like. 56:36 Or it will, it will be done to you and it will not. 56:39 It will be decided for you, right? 56:43 I couldn't agree more. 56:48 Well, thank you Ken and Morgan for a great presentation and thanks to everyone who joined us today. 56:54 Before you go, please take a moment to complete the evaluation form. 56:59 It is included in your calendar invite and will also pop up automatically when you close Webex. 57:06 The recording link will be shared with all registered attendees. 57:10 That concludes today's program. 57:12 On behalf of the IHA and Optum, thank you again for your time and your participation. 57:19 Have a great rest of the day.